Oil Heads for Longest Gain in a Month as U.S. Supply Seen Lower

June 27, 2017

(Bloomberg)

Oil advanced for a fourth day in New York, its longest run of gains in a month, on estimates that U.S. crude inventories continued their decline from record levels seen earlier this year.

Futures added as much as 1.5 percent after rising 2 percent in the previous three sessions. Inventories probably dropped by 2.25 million barrels last week, a Bloomberg survey showed before an Energy Information Administration report Wednesday. Prices also climbed as the dollar weakened against the euro following a positive outlook from European Central Bank President Mario Draghi, making dollar-priced commodities like crude more attractive.

Oil tumbled into a bear market last week on concerns that expanding global production will counter output cuts from the Organization of Petroleum Exporting Countries and partners including Russia. While U.S. stockpiles have fallen by 26 million barrels since March, they remain 100 million above the five-year average and drillers have added rigs for the longest stretch in at least three decades.

“What we need, to see prices moving higher, are inventory declines, particularly in the U.S.,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. “A reversal for oil could trigger a short-covering rally. It will depend on the weekly U.S. inventory data.”

West Texas Intermediate for August delivery was at $43.92 a barrel on the New York Mercantile Exchange, up 54 cents, at 8:15 a.m. local time. Total volume traded was in line with the 100-day average. Prices rose 0.9 percent on Monday but are down almost 10 percent this month, the worst June performance in almost 30 years.

Brent for August settlement was up 67 cents at $46.50 a barrel on the London-based ICE Futures Europe exchange, and traded at a $2.57 premium to WTI. The global benchmark crude advanced 0.6 percent to $45.83 on Monday.

U.S. crude stockpiles peaked at a record 535.5 million barrels in the week ended March 31, according to EIA data. While inventories have steadily declined since then, American oil production has climbed above 9.3 million barrels a day to the highest level since August 2015.

Oil-market news:

The Permian Basin, spanning Texas and New Mexico, has at least 25 more years to go before its oil gushers start dwindling, and producers will be able to make money even if crude falls to the mid-$20s, according to Scott Sheffield, chairman of Pioneer Natural Resources Co. Oil prices are probably near the bottom, but “badly damaged sentiment and a rising rig count will dent recovery,” Citigroup Inc. analysts wrote in a report on Monday.

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